How EEXI And CII Regulations Could Affect The Steam Turbine LNG Carriers

The conventional steam turbine propulsion systems installed on board the LNG carriers built in the 1970s, 1980s, 1990s, 2000s and early 2010s were designed not on fuel efficiency considerations but to use the boil-off gas generated by the LNG cargoes as fuel, taking into consideration a daily rate of boil-off gas of 0.15% based on the LNG tank insulation technology available at the time of the ships` building.
Following the technological innovations in the tank insulation and ship propulsion systems over the last ten years, the conventional steam turbines became the least efficient propulsion systems in the global LNG fleet. The LNG carriers powered by conventional steam turbines have the highest fuel consumption and generate the highest CO₂ emissions per ton of all types of LNG carriers.
In 2021, the IMO`s Marine Environment Protection Committee has included in MARPOL Annex VI the Energy Efficiency Existing Ship Index (EEXI) regulation which requires a minimum energy efficiency level (expressed in grams of CO₂ per tonne mile) for existing ships in function of the ship`s type and size. The Required EEXI for LNG carriers provides a minimum energy efficiency level based on a 30% reduction factor applicable to the reference line value set for the LNG carriers.
In order to comply with the EEXI requirements, the value of the Attained EEXI of LNG carriers of 10,000 DWT and above must be utmost equal to or less than that of the Required EEXI for LNG carriers.
In the case of the conventional steam turbine LNG carriers this would involve the installation of a shaft power limitation system to reduce the shaft power of the propeller shaft. This will reduce the speed of the conventional steam turbine LNG carriers, increasing the voyage time and the LNG cargo loss through boil-off. So, the actual effect of the technical measure recommended by the IMO`s Marine Environment Protection Committee to ship operators to comply with the Required EEXI is that the conventional steam turbine LNG carriers have to sail at slower speeds than before, spend more time on the voyages, consume even more LNG cargo as fuel and thereby, generate even higher emissions of CO₂ than before.
Another consequence of the speed reduction by the shaft power limitation could be that part of the naturally generated boil-off gas can no longer be used for propulsion and has to be burned in the Gas Combustion Unit to avoid the release of gas into the atmosphere.
In addition to the EEXI regulation, the IMO`s Marine Environment Protection Committee has introduced in MARPOL Annex VI the ship operators` obligation to report to the ship`s Administration data with regard to the annual fuel oil consumption (based on the daily fuel oil consumption data), the distance travelled in nautical miles and time (hours) spent on voyages. It has also introduced an operational performance indicator named "Carbon Intensity Indicator" (CII) by which it is possible to measure the carbon intensity of a ship in the course of a year¹.
This regulation requires that, on the basis of the annual fuel consumption data, the distance travelled and the time spent on voyages, after the end of the calendar year 2023 and after the end of each following calendar year, each ship of 5,000 gross tonnage and above to calculate the attained annual operational CII over a 12-month period from 1 January to 31 December for the preceding calendar year.
The attained annual operational CII of individual ships has to be calculated as the ratio of the total mass of CO₂ emitted to the total transport work undertaken in a given calendar year².
The total mass of CO₂ is the sum of CO₂ emissions (in grams) from all the fuel consumed on board a ship in a given calendar year. According to the Regulation 2.1.14 of MARPOL Annex VI, the fuel oil consumption data that has to be reported to the ship`s Administration should include the consumption data with regard to any fuel used for propulsion, including gas, distillate or residual fuels. Therefore, the LNG carriers using the boil-off gas as fuel should report the mass equivalent of the LNG volume consumed less the nitrogen mass content because the nitrogen does not contribute to CO₂ emissions.
The total transport work is calculated as the product of the ship`s capacity (in the case of LNG carriers, the ship`s DWT) and the distance travelled in nautical miles in a given calendar year.
Within three months after the end of each calendar year, starting from this year, each ship has to report to its Administration the attained annual operational CII.
Regulation 6.6 of MARPOL Annex VI stipulates that the ship`s Administration shall verify whether the attained annual operational CII is truly based on the fuel consumption data, distance travelled and time spent on voyages and, based on the verified attained annual operational CII and predetermined rating boundaries, shall assign an operational carbon intensity rating to the ship from among five grades, A, B, C, D and E, with A indicating a major superior performance level, B – minor superior performance level, C – moderate performance level, D – minor inferior performance level and E – inferior performance level.
The rating boundaries are set based on the distribution of the attained annual operational CII of the ships of the type concerned (such as the LNG carriers) in the year concerned (e.g. 2023) on the operational energy efficiency performance rating scale³.
The operational carbon intensity rating is assigned by comparing the attained annual operational CII of a ship with the boundary values on the operational energy efficiency performance rating scale for the ships of the type concerned. The middle point of rating level C shall be the value equivalent to the required annual operational CII⁴. The rating A is for the least carbon intensive ships, while the rating E is for the most carbon intensive ships.
Currently, the conventional steam turbine LNG carriers represent around one third of the existing fleet of LNG carriers, but in the coming years more and more modern LNG carrier newbuilds are expected to enter into service. These ships feature higher transport capacity, lower boil-off rates, enhanced propeller efficiency and more fuel-efficient engines with lower CO₂ emissions.
The modern LNG carriers will change the CII rating boundaries and the conventional steam turbine LNG carriers will not be able to achieve the required annual operational CII. The options of the conventional steam turbine LNG carriers` owners will be either to scrap these ships or upgrade them by replacing the steam turbines with modern dual-fuel engines such as WinGD`s X-DF 2.0 engines (the second generation of X-DF dual-fuel two-stroke engines) or MAN B&W ME-GI or ME-GA dual-fuel two-stroke engines.
Some shipowners are already considering the retrofit options. An example is Nippon Yusen Kabushiki Kaisha (NYK) Line who intends to replace the steam turbines of their LNG carriers with WinGD`s X-DF dual-fuel two-stroke engines.
The modern dual-fuel engines generate more power than the steam turbines with significantly less gas and fuel oil consumption and CO₂ emissions. The retrofitted LNG carriers will be able to sail at higher speeds and spend less time on voyages.
This measure will enable the shipowners to reduce the operational costs and extend the operational lifetime of older LNG carriers.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Gas Trade Review Edition No. 3.

Endnotes:

1. See Regulation 28 of MARPOL Annex VI.
2. See Resolution MEPC.352 (78) – "2022 Guidelines on Operational Carbon Intensity Indicators and the Calculation Methods (CII Guidelines, G1)"
3. See Resolution MEPC.354(78) – "2022 Guidelines On The Operational Carbon Intensity Rating Of Ships (CII Rating Guidelines, G4)"
4. See Regulation 28.6 of MARPOL Annex VI.